The US Internal Revenue Service (IRS) has released the inflation adjustment factor for the carbon oxide sequestration credit under IRC section 45Q for 2025 (Notice 2025-25, IRB 2025-20).
The inflation adjustment factor for calendar year 2025 is 1.4213.
The adjustments outlined below will take effect in 2025:
- The Section 45Q credit for 2025 is USD 28.43 per metric ton of qualified carbon oxide under Section 45Q(a)(1).
- The Section 45Q credit for 2025 is USD 14.21 per metric ton of qualified carbon oxide under Section 45Q(a)(2).
The inflation adjustment factor is used to determine the amount of the credit allowable under Section 45Q for taxpayers that make an election under Section 45Q(b)(3) to have the dollar amounts applicable under Section 45Q(a)(1) or (2) apply. The 2025 inflation factor of 1.4213 has increased credit amounts, substantially boosting incentives for carbon capture, utilisation, and storage projects.
Credit for carbon oxide sequestration
The credit for carbon oxide sequestration is a credit for qualified carbon oxide captured at a qualified facility using certain carbon capture equipment, which is disposed of in secure geological storage, used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of in secure geological storage, or utilized for specific purposes.
In general, the applicable dollar amount of the credit is:
- USD 17/metric ton of carbon oxide captured and disposed of in secure geological storage.
- USD 12/metric ton for carbon oxide that is captured and used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of in secure geological storage, or injected for enhanced oil recovery, or utilised.
- USD 36 for direct air capture facilities.
